Green bond market doubles in 2016 / New Nord Stream 2 hurdles

Ten years after their introduction, the issuing of so-called green bonds grows at a remarkable pace, Germany’s state-owned KfW development bank writes in a research paper. Between 2015 and 2016, global releases of the bonds, whose issuers are obliged to reinvest their proceeds in “green” projects like renewable energy or water quality improvement, have more than doubled from 32 billion to 68 billion euros, the KfW says. While green bonds used to be mainly distributed by supranational actors such as the World Bank, these issuers became a minority for the first time in 2016 and were replaced by commercial banks. In terms of the bonds’ national provenance, China boosted its releases from under one billion euros in 2015 to over 27 billion euros the following year, making it the country with the most new releases by far. By contrast, Germany’s releases in 2016 stood at around 4 billion euros, the KfW writes. But despite the bonds’ rapid growth “it remains a niche market”, the development bank says. The environmentally friendly bonds accounted for 1.4 percent of all bonds released in 2016.

Opposition to the planned Russian-German gas pipeline Nord Stream 2 is growing as Denmark drafts a new law that would allow the government to prevent the construction on the country’s continental shelf, writes Andreas Mihm in Frankfurter Allgemeine Zeitung. The Greens, a party highly critical of the project, are part of the upcoming government coalition talks in Germany, which could influence the German government’s stance in the future. Nord Stream 2’s spokesperson Ulrich Lissek said: “The fact of the matter is that it won’t work without more natural gas, in light of the agreed nuclear phase-out and the planned reduction of coal-fired power production.”

Germany’s industry is among the most efficient in the world and can hardly improve its energy intensity record by simply abiding by new regulations, a study by the industry-sponsored research institute IW Köln says. Andreas Mihm writes in the Frankfurter Allgemeine Zeitung that IW Köln’s research director Hubertus Bardt was sceptical of new efficiency directives considered by the European Union since there was no more technological leeway to improve industrial processes. Germany’s industry consumes the energy equivalent 76 kilogramme “oil units” to generate 1,000 euros in value, more than the 48 units needed in Denmark but less than the 134 units consumed in the United States, the study says. Research director Bardt says efficiency was a direct result of investments in modern technology, which is why it could only be improved by easing investments and not by imposing stricter guidelines on companies.

German Chancellor Angela Merkel told journalists that she expects talks to discuss the possibilities for a new government coalition to last several weeks before actual negotiations begin, news agency Reuters reports. The lengthy talks were down to the “unusual political constellation” after the federal election, where the CDU, CSU, FDP and Green Party aim to form an alliance. Merkel added that "we will not start putting down any red lines now. There are going to be enough conflicts anyway, nobody has any illusions about that,” writes Deutsche Welle in a separate article. The chancellor said she did not see the result in the Lower Saxony state election as weakening her party’s position in forming a federal government coalition. The CDU/CSU will start talks with the FDP and the Green Party in separate meetings on 18 October, the FDP and the Greens one day later. All four parties will meet for the first time on 20 October. Germany’s climate targets, the future of coal-fired power generation and other energy-related topics will likely play a big role in the talks.

Read the Reuters article in German here and the Deutsche Welle article in German here.

The slight fall of Germany’s renewables levy in 2018 is no reason for the government to sit back, writes Klaus Stratmann in an opinion piece in Handelsblatt. The decrease would save a one-person household “a mere 1.32 euros annually”, and the surcharge is likely to rise again in the coming years. When reforming renewables support, the next government should not simply distribute costs in a different way. Renewables producers had to do their part. “It speaks volumes that they still receive remuneration even when nobody wants the power,” writes Stratmann.

Germany’s renewables expansion with the help of the EEG surcharge has cost the country much more than necessary, writes Michael Bauchmüller in an opinion piece in Süddeutsche Zeitung. “Kick-starting clean energy was basically a good idea. But nobody realised how fast wind and sun became a cheap alternative,” writes Bauchmüller. Consumers could draw hope for lower renewable power prices from the grand coalition’s move to switch to auctions for renewables support this year,” he adds.

Consultancy Energy Brainpool has analysed Germany’s aspiring government coalition parties’ manifestos on their energy policy positions. The group derived five major challenges that can serve as a basis for common action. A so-called Jamaica coalition of the conservative CDU/CSU alliance, the pro-business FDP and the environmentalist Green Party will face challenges in climate protection, energy storage and sectoral integration, cost allocation, digitalisation and European internal market integration, the consultancy says. It concludes that an “effective CO2 price” of about 30 euros per tonne, which includes all sectors and is applied in as many European countries as possible, is indispensable for climate protection. Also, sectoral integration will “lead demand away from burning fossil fuels to an optimised use of renewable energy”, while a more flexible composition of the power price allowed for more rapid electrification of energy markets. Moreover, a focus on digital processes can boost efficiency in the energy sector and European integration maximises the effect of these measures, Energy Brainpool writes.

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